Economic development strategists
in the Seventh District
have tried to hitch their wagons
to the booming service
sector as a means of replacing
disappearing paychecks in manufacturing and
agriculture. But not all services are capable of
driving regional growth. Service sector jobs
satisfying local consumer demand, such as dry
cleaning and most retail sales, do not usually
generate additional personal income. According
to the so-called "export base" theory, goods
and services sold afar generate income which,
in turn, finances local income and spending on
nonexport goods and services. In this way, the
portion of regional growth that is generated by
changes in external demand for the region's
exports is usefully identified for purposes of
development policies. Accordingly, the region's
perspective correctly focuses on those
service sectors that are driven by external demand—
that is, so-called "export sales." 1 In
particular, producer services industries have
been associated both with strong growth of late,
and with external rather than local markets.
Producer services are services sold to firms
rather than to consumers and typically include
accounting, management consulting, financial
services, real estate, insurance, engineering,
architecture, and credit reporting.' The producer
services sector represents one of the most
rapidly growing sectors as measured by the rate
of job growth (see Table 1). Moreover, its
growth has been consistently high over the past
two decades, growing at an annual rate of 4.5
percent per year from 1969 to 1979, and 4.8
percent from 1979 to 1989.